Benefits of having the 'money talk' with your partner

The money talk takes many shapes, but the essential ingredient is that both partners speak honestly and openly with one another -- itâ s critical to a healthy relationship. (Mark Gilliland/AP Photo)

If you're about to enter into a serious relationship with someone, move in together, or even tie the knot, coming to a mutual understanding about joint personal finance is essential. It may not always be a comfortable conversation, but agreeing on levels of spending, saving, and debt can help a relationship flourish --- and ignoring these issues can damage it all too easily. The best way to come to an understanding is to sit down and have a frank discussion, both broad and detailed, that lays out the financial philosophy, history, and aspirations of both partners, and attempts to find common ground upon which both can move forward. This discussion is called “the money talk,” and if you haven't had yours yet, the time is now.

The Money Talk: What is it?

The money talk is different for every couple, which makes it difficult to craft a cookie-cutter definition. However, there are a few traits common to them all. It involves sitting down with your loved one and coming to a joint mindset on a variety of financial topics as you move forward. Depending upon your situation, these topics can include budgeting, saving for retirement, eliminating credit card debt, and rules addressing when one partner needs approval from the other to spend a significant sum of money. The money talk takes many shapes, but the essential ingredient is that both partners speak honestly and openly with one another -- it's critical to a healthy relationship.

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Why to have the Money Talk

1. Your relationship depends on it

Fifty percent of American marriages end in divorce, and money is one of the leading reasons for that. If you end up having to take back your vows because you and your spouse can't agree on financial issues, chances are you're going to have to spend a lot of cash on an expensive divorce lawyer, revert to paying monthly expenses on your own, and of course deal with difficult emotional and familial ramifications, as well. Have the money talk now and your chances of marital bliss increase significantly.

2. Things are going to change

Imagine yourself 20 years from now with your partner -- where are you living, how has your career changed, how many kids do you have, are they getting married? There are a lot of uncertainties in life, and your finances have to be able to adjust to account for them. Children are wonderful, but they're not free. The same goes for homes and cars. And, of course, you may encounter unexpected emergencies or go through a career change or job loss. Therefore, it's in your best interest to set goals now along all financial fronts, whether it's investing for retirement, building an emergency fund, or getting that monthly budget in place.

3. Establish common ground

If you're a spender and your partner is a saver, get that information on the table now. Coming to an agreement on your joint spending habits -- including agreeing on limits, debt, and a strategy for major purchases -- is critical to ensuring your long-term compatibility together.

4. Significantly reduce arguments

Of course, there are times when you and your partner are going to disagree. You may want that second car, your partner may think you can get by with just one. You may want to stay home this summer, but your partner may want an expensive European vacation. There are always going to be issues that need resolution, but you can significantly limit the number -- and intensity -- of your disagreements by formulating an overall strategy in advance.

What else?

Before you sit down to have your money talk, establish some procedural rules for it. Vow not to judge one another, shout at one another, or make absolute demands. Don't use it as a forum to criticize your partner for past purchases. The goal of the money talk is to establish a game plan going forward, not to look back. Assume a certain level of maturity going in, and be sure to frame any criticism in a constructive light. Becoming part of a couple is a wonderful step, just make sure to address your differences and come to a mutual understanding going forward.

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